I've done a DCF of a tech SaaS S-1 to test at the advice of a friend who is a PM in tech at a hedge fund. It still seems like magic, and even more so then, but

I've done a DCF of a tech SaaS S-1 to test at the advice of a friend who is a PM in tech at a hedge fund. It still seems like magic, and even more so then, but it penciled. Sponsor got in with the last pre-IPO round (think like a Wellington/Fidelity who essentially buys their IPO allocation by entering slightly early) at $3.5B, IPO was $4.5B, and Friday night post dinner w/ redbull DCF spit out ~~$5.0B to $6.5B. After a few months it trended up to that Enterprise Value. The mind is simply not good at understanding compounding at 70% (or whatever) free cash flow conversion. Not having COGS or working capital or CAPEX is magical. That being said it’s insanely hard to move from a “things might be worth 10x EBITDA” to “things might be worth 10x revenue”. It’s like using different parts of the brain (left vs right) or quantum physics versus more traditional physics: there’s some magical stuff that’s probably rules based with underlying structure underneath that just doesn’t make sense. Just one anecdotal example.